Mehr Fairbanks Trial Lawyers has obtained a $400,000 settlement in a bad faith case against an insurer.

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Recently, an 11^th Circuit Court in Florida held that when a private settlement constitutes an “excess judgment” under an insurance policy, the insured(s) can use the amount in the settlement to bring a bad-faith claim against their insurer. This decision overturns a previous 2019 decision (which was unpublished) stating that the only method through which insureds could establish a bad-faith excess judgment claim was after the case had reached a jury verdict at trial. The insureds in this case are now able to bring suit against their insurer, Geico Insurance, for allegedly agreeing to a settlement in excess of policy limits.

The policy at issue in this case was an auto insurance policy that gave coverage for up to $100,000 (per person) for bodily injury. The insureds under the policy were at fault in an accident, causing serious bodily injury to the other party, the costs of which exceeded the policy limits. When the parties could not reach an agreement during settlement negotiations, the injured driver sued the insureds in Florida state court. The insureds were then provided with counsel by Geico for the duration of the suit, as was dictated by their policy. The parties eventually reached an agreement in the form of a settlement, but the amount agreed upon drastically exceeded the policy limits. The terms of the settlement delineated that one of the insureds (the owner of the vehicle involved in the accident, but not the driver at the time) would pay to the injured party $474,000. This amount is small compared to the amount the settlement required of the at-fault driver, which came out to $4.47 million. The settlement also included that Geico would agree to not hold the insureds in breach of the policy through acceptance of the offer.

Florida state law provides that insureds may bring bad-faith insurance claims when the insurer grants an “excess judgment,” meaning that the insurer (in bad-faith) chose to accept a settlement agreement that exceeded policy limits. Under this principle, the insureds filed a claim against Geico, requesting damages amounting to the total agreed upon in the settlement that was over the $100,000 policy limit. Prior to this decision, the case against Geico would have been dismissed since the excess judgment was not award through a jury verdict after trial. Judge Kevin C. Newsom disagreed with this precedent, as his opinion on the matter stated, “a jury verdict is not a prerequisite to an excess judgment in a bad-faith action.” Judge Newsom’s reasoning relies on Florida state law, reiterating that when insureds are, “subject to excess judgments, they [can] prove causation in their bad-faith case.” Further, Judge Newsom states that previous opinions in lower courts which had relied on the older decision may not have properly interpreted the state law. He states that the reliance on the precedent was caused through a misinterpretation of another previous case in which a jury verdict happened to be present, which should not have resulted in a requirement that a jury verdict must exist in all cases.

To Judge Newsom, the result in this case is “common sense.” Regarding concerns that the decision could leave insurers vulnerable to bad-faith claims, the Judge concludes that a claimant must still show proof of “other elements of their claim of bad faith.” Thus, this holding does not leave the door open for increased litigation in this area that would not likely be brought otherwise.

This decision is a win for the rights of policyholders in the state, as litigation will no longer be the only means to secure a claim of bad-faith against an insurer in an excess judgment case.

Recently, a Federal Court in North Carolina approved a settlement for over $3 million between a Coca-Cola (Defendant) bottling plant and a class of former employees. The named Plaintiffs brought the action against the Defendant alleging that the company had violated their fiduciary duties by presenting “risky” investment options to ERISA plan holders while additionally charging excessive fees. The Court held that the amount of the settlement was “fair, reasonable and adequate, taking into account the costs, risks and delay of litigation, trial and appeal.” Pursuant to this decision, the Court also ruled that the class presented by the Plaintiffs was appropriate for certification and includes all “participants and beneficiaries” under the plan in question. This totals around 13,000 individuals, according to a motion brought by the named Plaintiffs which is now moot after the Court’s certification of the class.

The details of the settlement agreement include statements that the Defendants denies any “wrongdoing or legal liability,” as well as the Defendants’ opinion that the group of 13,000 individuals was not appropriate for class certification. The specific wrongdoing alleged by the Plaintiffs is that the Defendants could have used their large size as a corporation in order to ensure that record-keeping and management fees were low for plan participants, which the failed to do. Additionally, Plaintiffs contend that the Defendants “imprudently” chose higher cost management services, though they had been presented with lower cost alternatives. According to the Plaintiffs, these decisions made by the corporation and its plan fiduciaries caused monetary losses into the millions. Lastly, the Plaintiffs contend that coupled with the breach of fiduciary duties through the above-mentioned means, the Defendants also breached their duties through their failure to disclose information concerning the fees and “risks” of the investment options they had selected. Further, the Plaintiffs state that the Defendants did not make an effort to actively monitor those in charge of administering their ERISA plans, thus further acting imprudently and in violation of their duties to the participants.

Prior to this proceeding, the Defendants had moved to dismiss the case in early 2021, a request which was subsequently denied in March the same year. The Court ruled that the Plaintiffs had presented a case that should move past the initial pleading stage of the trial process, and thus dismissal would be inappropriate. The parties will now move forward with the settlement agreement, with the Plaintiffs now as a certified class.

This decision is one of many recent decisions mirroring the same outcome, as courts are consistently holding that plaintiffs with complaints alleging violations of fiduciary duties by their employers and ERISA plan administrators are entitled to class certification. ERISA itself lays the foundation for employees to bring suit against their employers in cases similar to that brought in North Carolina, as the law requires that fiduciaries to a plan must act, “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.”[i] Through numerous class certifications, courts are presenting plaintiffs with the opportunity to correct wrongs brought against them by the actions of their employers and ERISA fiduciaries alike.

[i] 29 U.S.C. § 1104(a)(1)(B).